The sequester, explained
Posted by Suzy Khimm
on September 14, 2012 at 2:35 pm

The White House has released its plan explaining how the sequester’s mandatory spending cuts to defense and domestic spending will be implemented in 2013. Here’s the background on what the sequester is, how it happened and what happens from here:

What is the sequester?

It’s a package of automatic spending cuts that’s part of the Budget Control Act (BCA), which was passed in August 2011. The cuts, which are projected to total $1.2 trillion, are scheduled to begin in 2013 and end in 2021, evenly divided over the nine-year period. The cuts are also evenly split between defense spending — with spending on wars exempt — and discretionary domestic spending, which exempts most spending on entitlements like Social Security and Medicaid, as the Bipartisan Policy Center explains. The total cuts for 2013 will be $109 billion, according to the new White House report.

Under the BCA, the cuts were triggered to take effect beginning Jan. 1 if the supercommittee didn’t to agree to a $1.2 trillion deficit-reduction package by Nov. 23, 2011. The group failed to reach a deal, so the sequester was triggered.

Why does everyone hate the sequester so much?

Legislators don’t have any discretion with the across-the-board cuts: They are intended to hit all affected programs equally, though the cuts to individual areas will range from 7.6 percent to 9.6 percent (and 2 percent to Medicare providers). The indiscriminate pain is meant to pressure legislators into making a budget deal to avoid the cuts.

How would these cuts affect the country?

Since the details just came out, it’s not entirely clear yet. But many top defense officials have warned that the cuts will lead the military to be “hollowed out.” Democratic legislators have similarly warned about the impact on vital social programs. And defense, health care and other industries that are significantly dependent on federal spending say that major job losses will happen if the cuts end up taking effect.

At the same time, if legislators try to avoid the sequester without replacing it with real deficit reduction, the U.S. could face another credit downgrade.

Why did Congress and the White House agree to the sequester in the first place?

The government was approaching its debt limit, which needed to be raised through a congressional vote or else the country would default in early August 2011. While Democrats were in favor of a “clean” vote without strings attached, Republicans were demanding substantial cuts in exchange for raising the debt limit.

President Obama and congressional leaders ultimately agreed to the BCA, which would allow the debt ceiling to be raised by $2.1 trillion in exchange for the establishment of the supercommittee tied to the fall-back sequester, as the Center for Budget and Policy Priorities explains. The deal also includes mandatory spending reductions on top of the sequester by putting caps on non-entitlement discretionary spending that will reduce funding by $1 trillion by 2021.

Who supported the debt-ceiling deal?

Party leaders, the White House and most members of Congress supported the debt-ceiling deal: The BCA passed on a 268-161 vote in the House, with about one-third of House Republicans and half of House Democrats opposing it. It passed in the Senate, 74-26, with six Democratic senators and 19 Republican senators opposing it.

Can the sequester be avoided?

Yes, but only if Congress passes another budget deal that would achieve at least $1.2 trillion in deficit reduction. Both Democrats and Republicans have offered proposals to do so, but there still isn’t much progress on a deal. The political obstacles are the same as during the supercommittee negotiations: Republicans don’t want to raise taxes to generate revenue, while Democrats are reluctant to make dramatic changes to entitlement programs to achieve savings.

What happens from here?

No one on Capitol Hill thinks any deal will happen before Election Day. After Nov. 6, Congress will have just a few weeks to come up with an alternative to the sequester. The challenge is complicated by the fact that the Bush tax cuts, the payroll tax, unemployment benefits and a host of other tax breaks are all scheduled to expire Dec. 31. The cumulative impact of all of these scheduled cuts and changes is what’s popularly known as the fiscal cliff. There’s already talk of passing a short-term stopgap budget plan during the lame-duck session to buy legislators more time to come up with a grand bargain.

The sky isn't falling on the Pentagon
By William D. Hartung, director, Arms and Security Project, Center for International Policy
02/11/13 03:00 PM ET

The sky is falling, the seas are rising, the earth is moving, and catastrophe is on the horizon. Or so say alarmist Pentagon officials and defense contractors and their lobbyists in describing the potential impacts of automatic cuts known as ‘sequestration’ to anyone who will listen.

To be sure, sequestration is not an ideal way to plan a budget. Making adjustments mid-fiscal year makes little sense from a management point of view. The best solution is for the president and the Congress to come up with a balanced package of revenue increases and domestic and Pentagon spending reductions that phases in strategically over time.

But here’s a crucial point: the Pentagon can absorb an 8 percent reduction to a $500 billion-plus budget of the level called for by sequester while maintaining a strong defense, given smart management.

Insufficient management is part of the problem getting us to this point. Rather than plan ahead for the possibility of sequester last year, the Pentagon adamantly refused to plan in hopes that doing so would somehow make it easier to fend it off. Pentagon spending so far this year is also well above the levels required by the continuing resolution that is supposed to govern federal outlays until Congress passes a budget for 2013.

But despite this, President Obama’s most trusted advisors are meeting with Pentagon contractors without, it appears, asking them to make any reforms in their own practices. Of all the tradeoffs being asked of Americans, would it be so bad to ask the large contractors -- whose 2012 revenues beat their 2011 gains despite their hand-wringing throughout the year—to consider reducing CEOs’ pay that now exceeds $20 million per year on average, or to take greater responsibility for their routine cost overruns, instead of passing them onto the taxpayer?

While the military services would have to make real but manageable adjustments, major Pentagon contractors will be cushioned from significant impacts due to billions in weapons funds already in the pipeline and multi-billion dollar backlogs. They will be the least affected of any of the recipients of Pentagon funding.

And on the bigger question of maintaining security in a time of belt-tightening, even the agitated memos from the military services aren’t so scary. Take the Air Force, for example. Its sequester memo talks about slowing spending on projects like the Space-Based Infrared System (SBIRS), which the Government Accountability Office has described as one of the most troubled military satellite programs. Similarly, isn’t it just common sense to slow down the F-35 fighter program, which could cost $1.4 trillion over its lifetime for an aircraft whose capabilities are unproven and whose need in large numbers is questionable? And, as the Air Force also suggests, why not cut spending on air shows and conferences in tight fiscal times?

Sequester or no sequester, the Pentagon can afford to scale back its plans by $500 billion over the next decade, an exercise that would still leave it with over $5 trillion to spend over that time period.

There are numerous ways to get there, as outlined by a range of well-established thinkers from the left, right and center. Cost-saving proposals include gradually reducing troop numbers to pre-Iraq and Afghan war levels, scaling back on the Pentagon’s use of costly service contractors, and eliminating or scaling back projects -- like the F-35, a new nuclear bomber, and a new generation of ballistic missile submarines — whose capabilities are better attuned to Cold War.

These plans acknowledge sequestration isn’t ideal, but they also provide us with a politically and strategically sound way to bring the Pentagon budget under control after over a decade of non-stop growth that’s only (slowly) leveled off in the past two years.

What the Pentagon and its top contractors need is a good strong dose of fiscal discipline. Rather than fighting reductions in spending that are modest by historical standards, they should be thinking through how to implement them in ways that prepare our military to meet 21st century challenges.

White House press secretary Jay Carney said on Thursday that a “list of demands” put out by Speaker John Boehner on the so-called sequester is “terrible,” and urged Republicans to reconsider their approach on the looming spending cuts.

In comments to reporters at an off-camera briefing, Carney said President Obama is worried Republicans are willing to allow $85 billion in spending cuts to go forward on March 1. Obama earlier this week argued those cuts would hamper the economy just as it is showing signs of growing.

Neither Obama nor Boehner (R-Ohio) have offered any specific plans this year to replace the $85 billion sequester, which would hit the Pentagon and domestic discretionary spending. During the last Congress, the GOP-led House narrowly passed legislation that would avert the sequester. With a smaller majority, Republicans have no plans to move a bill before the end of the month.

Obama has called for the sequester to be replaced with a combination of spending cuts and tax hikes, while Boehner and Republicans say that it should only be replaced by other spending cuts. Obama is scheduled to address the House Democratic retreat on Thursday and is likely to talk about the sequester.

Boehner on Wednesday decried the sequester as taking a “meat axe” to programs, but said he would not agree to delay the cuts unless there was an agreement to replace them with a new package of spending cuts. He said he would not agree to include any tax hikes as part of a replacement package.

The White House said Carney’s “list of demands” comment was in reference to a story in Politico quoting a GOP leadership aide listing 10 options that Republicans could consider to replace the sequester.

A GOP aide told The Hill that Boehner has not floated any new ideas to the White House and that the options on the table stem from various deficit discussions over the last two years.

The options included raising the Medicare eligibility age from 65 to 67, and adjusting the formula by which government benefits are calculated for inflation under programs like Medicare and Social Security in a less generous way. The calculation is known as the chained consumer price index.

Obama in December offered to adjust the chained CPI as part of negotiations with Boehner over the “fiscal cliff” of tax hikes scheduled this year.

Carney on Thursday said such changes would take benefits away from the elderly and others who rely on them.

“The Speaker has come up with a list of demands, of cuts, that would have to be in place for him to agree to buy down the sequester, and guess what? They’re terrible," Carney said at the briefing Thursday.

He added that the demands by Republicans are part of a “public relations effort” to change the way the Republican Party is viewed on these matters.

“I don't know where Republicans have been of late but that is not a winning approach,” Carney said. “It is not an approach the American people support and it is not an approach that this president will accept. We need balance.

"We think we can make tough choices but we have to do it in a way that is balanced and fair for everybody," Carney added.

Republicans argue the “fiscal cliff” agreement in January included only tax hikes, and that future efforts to bring down the deficit should focus on spending cuts.

“We believe there’s a better way to lower the deficit,” Boehner said Wednesday. “But Americans do not support sacrificing real spending cuts for more tax hikes. The president’s sequester should be replaced with spending cuts.”

Senate Democrats are aiming to produce a bill to replace the sequester by Thursday, according to Democratic aides.

The bill would include tax increases and spending cuts, and it would replace the $85 billion in automatic spending cuts known as the sequester.

With both houses of Congress scheduled to be out of Washington next week, Senate Democrats hope producing a package this week would allow them to sell their measure to constituents back home during the recess and pressure Republicans to act to prevent the cuts, one aide said.

The sequester, which most members in both parties say will damage national security with its cuts to the Pentagon and other programs, is set to take effect on March 1, leaving Congress little time to act before the Presidents Day recess next week.

If the full caucus approves the draft plan, it could be formally introduced on the floor Thursday, one aide said.

The bill’s introduction could set off a series of procedural motions that would take days to complete.

Democrats are putting the finishing touches on the provisions for the sequestration package, and Senate Majority Leader Harry Reid (D-Nev.) plans to present the details as early as Tuesday to the full caucus, aides said.

Democratic aides stressed Monday that their proposal was not yet complete.

Aides have said elements of the package could reflect a plan offered last week by Rep. Chris Van Hollen (Md.), the top Democrat at the House Budget Committee. That measure would eliminate subsidies to the farm industry, scrap tax preferences used by oil-and-gas companies and implement a new minimum tax rate on people making seven figures annually — the proposal commonly known as the “Buffett Rule.”

The New York Times reported Monday that Senate Democrats were closing in on a $120 billion package that would include elements of the Van Hollen proposal.

Senate Democrats from energy-producing states, including a couple that are up for reelection in 2014, have balked at the oil-and-gas proposal in the past.

Other Democrats, including Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.), a member of leadership, could take issue with ending direct payments to farmers now, because it could make it more difficult to complete a five-year farm bill that includes deficit reduction.

House Republicans in the last Congress voted twice to replace the sequester with a mix of discretionary cuts and cuts to mandatory spending such as farm programs and entitlement benefits. There are no immediate plans to move that bill again in this Congress, sources have said.

The White House at this point is deferring to Senate Democrats to take the lead on a sequester replacement. President Obama last week called on Congress to at least pass a short-term delay as wider budget matters are worked out.

The $85 billion in spending cuts this year is the first part of nine years’ worth of spending cuts agreed to in the 2011 Budget Control Act. Those cuts would shave $1.2 trillion from deficits when interest savings are factored in.

Obama has said he is still holding out for a larger agreement to replace the next eight years of cuts. He has called for hundreds of billions of dollars in new revenues from ending tax breaks, but he said a concession on entitlement benefits that he has offered in the past remains on the table. In talks with Speaker John Boehner (R-Ohio) last year, Obama offered to adopt a less generous way of adjusting benefits in government programs for inflation, called the chained consumer price index.

White House press secretary Jay Carney said Monday that while that offer remains on the table, Obama was now opposed to raising the eligibility age for Medicare, even though the White House put that on the table in past talks.

So far, most Republicans are insisting that the sequester be replaced with spending cuts alone. The bills approved by the House last year included $315 billion in new spending cuts; given the $600 billion in tax hikes agreed to as part of the “fiscal cliff” deal earlier this year, Republicans say the revenue discussion is over.

House Minority Leader Nancy Pelosi (D-Calif.) on Monday sent a letter to Speaker John Boehner (R-Ohio) asking him to cancel the Presidents Day recess until a sequester replacement is agreed to.

Separately on Monday, Sens. Carl Levin (D-Mich.) and Sheldon Whitehouse (D-R.I.) introduced a bill that would close corporate tax breaks in order to raise $189 billion to replace the sequester cuts.

The Cut Unjustified Tax Loopholes Act aims to make it more difficult for multinational companies to avoid paying taxes on profits earned outside the United States. It would change the tax treatment of stock options and derivatives, and it would increase taxes on hedge fund managers by closing the “carried interest” tax break.

Levin said last week he would be pushing to get elements of his bill into any sequester replacement legislation his party comes up with.

Environmental groups, the welfare lobby and other big-government organizations are preparing a media blitz to warn Americans of the supposed catastrophic effects of the 5% cut in domestic spending…All this destruction from a five percent cut from agencies that got, on average, 20%-plus budget hikes over the past four years…This is, of course, the old ‘Washington Monument’ ploy. Whenever agencies are asked by Congress to pinch pennies, they shutter the most visible and popular programs in order to build voter opposition to the cuts.

“It is pretty clear to me that the sequester is going to go into effect,” McConnell said.

“I see no evidence that the House plans to deal with this matter before the end of the month. As you indicated, the majority is going to offer a proposal. I anticipate that we will have an alternative proposal. That however doesn’t lead to a solution, that just leads to a couple of votes,” he added.

McConnell was reacting to an announcement by Senate Majority Leader Harry Reid (D-Nev.) Tuesday that Democrats would unveil a sequester replacement by the end of this week for votes in the final hours before the March 1 sequester deadline.

McConnell said “the tax issue is over.” He argued that in passing the 2011 Budget Control Act (BCA), which set up the sequester, Congress had pledged to replace the sequester only with spending cuts.

The BCA set up a supercommittee charged with finding at least $1.2 trillion in deficit reduction, through spending cuts or tax increases. McConnell argued Tuesday that with its failure, Congress has committed only to doing spending cuts.

“I think we ought to keep the commitment we made….If the supercommittee failed, these reductions were made without raising taxes,” he said.

McConnell has emerged as the GOP’s closing negotiator in all the major fiscal battles of the last two years. Talks between McConnell and Vice President Joe Biden set up the BCA and also resolved the "fiscal cliff" tax fight on New Year’s Eve.

The minority leader said he is not interested in rescuing the situation in the hours before the March 1 deadline hits.

“Read my lips: I am not interested in an eleventh-hour negotiation,” he said.

“There is an eerie similarity here, isn’t there, to previous occurrences,” he noted. “Take no action, go right up to the deadline, and have an eleventh-hour negotiation.”

Reid and Senate Democrats were not far enough along in finalizing their sequester replacement to discuss it at party lunches on Tuesday. Senators expect to be briefed on a package on Thursday.

One issue is how to write a section cutting farm subsidies known as direct payments. Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) told The Hill she is in talks on the language so that the sequester bill does not hurt her effort to pass a five-year farm bill.

The rest of Reid’s approximately $120 billion proposal is said to involve imposing a higher minimum tax on millionaires—known as the Buffett Rule—and allowing some targeted defense cuts to take place among other changes.

“The bills being drafted will include equal amounts of revenue and cuts, because Democrats believe the right way to reduce the deficit is to target waste and abuse by pairing smart spending cuts with closing tax loopholes, asking the wealthiest Americans to contribute more,” Reid told reporters.

Reid said that he will have a meeting on the sequester with Speaker John Boehner (R-Ohio) this week.

The Market is Shrugging off Sequestration – For Now
By Walter Kurtz, Sober Look
02/13/2013 11:12 AM

As the so-called sequestration approaches, jitters among defense contractors are becoming quite visible. 50% of the cuts are expected to hit the Pentagon budget. States like Virginia, where the defense industry is a major portion of private employment as well as a key source of tax revenue, are also becoming uneasy.

The markets however seem to be shrugging off the impact of sequestration. Over the past few months (including the post-election period) a basket of major defense stocks has performed in line with the S&P500 (see figure 1 below). And in spite of sequestration’s overall negative impact on the GDP, the broad market is near multi-year highs.

Market expectations seem to indicate that these cuts will be avoided – possibly at the last minute. For now however it looks as if sequestration may potentially go into effect.

Quote:

Bloomberg: – Democrats and Republicans in the U.S. Congress are nowhere near a plan to avert $1.2 trillion in spending cuts about two weeks before they are set to begin.

It’s the latest in a series of fiscal deadlines created by Congress that in the past two years took the U.S. to the brink of a debt default, a government shutdown and middle-class tax increases that neither party wanted. Unless lawmakers act, the across-the-board spending reductions will begin March 1.

Leaving the cuts in place would shave U.S. economic growth this year by 0.6 percent and cost 750,000 jobs by the fourth quarter, Congressional Budget Office Director Doug Elmendorf said yesterday at a hearing.

About half the cuts would affect defense spending, and military leaders are pressuring lawmakers to avoid them. Allowing the reductions, known as sequestration, to take effect would mean less training for Army personnel and fewer purchases of Navy vessels and Air Force fighter jets, the leaders said.

“It’s pretty clear to me that the sequester’s going to go into effect,” Senate Minority Leader Mitch McConnell, a Kentucky Republican, said yesterday.

And it seems that a number of politicians actually want to see sequestration activated.

The House Democratic plan: Fend off the sequester for one year by raising taxes and cutting farm subsidies.

By contrast, House Democrats have put forward a plan to fend off the $85 billion in sequester cuts for 2013. The spending cuts for subsequent years would be allowed to stand.

But the bill wouldn’t affect the deficit at all. Democrats would pay for that $85 billion through a mix of different cuts and taxes: Cut a farm-subsidy program that offers direct payments to farmers. Raise premiums on the National Flood Insurance Program. Implement a minimum tax for income over $1 million. And eliminate various tax deductions that benefit oil and gas companies.

Most of these taxes and spending cuts would be spread out over 10 years. So Van Hollen’s bill would essentially give the budget — and the U.S. economy — some breathing room in 2013 and postpone deficit reduction until later on.

The hitch? Republicans in the House aren’t fans of this idea. Just this week, Van Hollen’s bill was rejected by the House Rules Committee.

8 For by grace you have been saved through faith. And this is not your own doing; it is the gift of God, 9 not a result of works, so that no one may boast. 10 For we are his workmanship, created in Christ Jesus for good works, which God prepared beforehand, that we should walk in them.

With two weeks until deadline, $85B sequester is looking inevitable
By Ian Swanson and Alexander Bolton
02/15/13 05:00 AM ET

The question in Washington is no longer whether the automatic spending cuts known as the sequester will be implemented: It's when and even if the spending reductions will ever be shut off.

The $85 billion in cuts looming on March 1 would run through the end of the fiscal year on Sept. 30, leaving more than $900 billion in cuts for Congress and the White House to wrangle with over the next eight years.

Pressure may intensify to pass sequester legislation in March as federal workers are furloughed and Pentagon and other government programs are cut.

But the cuts seem also certain to begin rolling given the vast distance between Democrats and Republicans over how to avert them.

“We’re pretty far away because we have revenue in ours,” said Sen. Ben Cardin (D-Md.), commenting on the daylight between Democratic and GOP leaders.

Cardin was commenting on a proposal unveiled Thursday by Senate Democrats that would thwart the first $85 billion in spending cuts set to hit government on March 1.

The bill has little chance of passing even the Democratic-controlled Senate, as it would replace the sequester with $110 billion in deficit reduction that includes $55 billion in new tax hikes that are anathema to Republicans. GOP leaders are expected to block the measure.

Republicans have said they will agree to no deal that includes new taxes, and they have shown no sign of moving from their position.

Sen. Bob Corker (R-Tenn.) said he would not support a bill to halt $85 billion in cuts scheduled for 2013 by paying for it with offsets spread over the next decade.

“It’s my guess that sequester is going to kick in on March 1 because, again, unless you have real reductions in spending, this bill just kicks the can down the road,” he said in reference to the Democratic proposal.

The most dramatic signal came from Senate GOP Leader Mitch McConnell (Ky.), who twice in the last two years has worked with Vice President Biden to reach last-second fiscal deals after President Obama and Speaker John Boehner (R-Ohio) failed.

Those agreements have allowed people inside and outside the Beltway to grow accustomed to thinking Washington’s leaders will bicker until the last minute before reaching a deal. Not this time, McConnell said this week.

“Read my lips: I am not interested in an eleventh-hour negotiation,” McConnell told reporters Tuesday. He said it was pretty clear to him “that the sequester is going to go into effect.”

Obama urged Congress to deal with the sequester in his State of the Union address, but Republicans were unmoved, saying he has not put forward a credible plan that will attract bipartisan support.

Both sides have been working to find an advantage in a public relations fight over who is to blame that will only intensify come March 1, two weeks from today.

Anticipating the battle, the Senate Democratic bill features a proposal to impose a minimum 30 percent tax on millionaires known as the “Buffett” rule. It is named after billionaire investor Warren Buffett, who has said he pays a lower tax rate than his secretary.

Republicans have repeatedly rejected the Buffett rule, but its inclusion would allow Senate Democrats and the White House to argue Republicans were holding up a sequester-fix to protect tax rates for the wealthy.

McConnell called the bill a “political stunt.”

“Remember, this is not a solution — even they know it can’t pass, that’s the idea — it’s a political stunt designed to mask the fact that they’ve offered no solutions, and don’t plan to offer any,” McConnell said Thursday.

The GOP, for its part, has done everything it can to remind voters — and reporters — that it was the White House that came up with the idea of the sequester in the 2011 talks to raise the debt ceiling.

The $85 billion in cuts would not all be implemented at once. They would be set out between March 1 and Sept. 30, when the fiscal year concludes.

That could give lawmakers time to turn a portion of them off before the end of September should political pressure for action build.

“We are days away from sequestration going into effect. We’re going to be hearing more and more from businesses who are going to be impacted, from people who are going to be furloughed, who won’t be able to pay their mortgage, impacting the housing market again. We’re going to be hearing from our defense department that cannot manage this kind of a cut,” Murray said.

Financial markets dropped as Washington flirted with going over the nation’s debt limit and allowing the “fiscal cliff” of tax hikes to be implemented. But markets have paid less attention to the first year of the sequester.

“I can’t honestly say this has been at the front of people’s minds,” said Daniel Alpert, managing director of Westwood Capitol.

One reason is that while $85 billion is hardly a drop in the bucket, it’s a smaller sum in the context of the broad economy, or even the annual budget deficit.

Alpert said Washington’s deal on the fiscal cliff, and a separate agreement to raise the debt ceiling, took away the possibility of “mass panic on the streets.”

Still, he said analysts are sure to revise their economic forecasts down because of the cuts, and a drop in financial markets remains possible, particularly after initial figures from the Commerce Department showed a fourth-quarter of 2012 contraction blamed largely on defense industry cuts and a drop in federal spending.

The non-partisan Congressional Budget Office has projected economic growth of only 1.4 percent this year if the $85 billion in cuts are implemented. It also says the cuts would reduce hiring this year by 750,000.

This year’s planned cuts of $85 billion are just a slice of the $1.2 trillion in deficit cuts, which includes reduced interest payments, that are to be made from the sequester.

Alpert argues that if the economy dips in the second quarter, pressure from businesses and Wall Street on Washington will grow, for fear that the larger cuts will stall the recovery.

A large group of liberal Democrats are pushing back against Senate Majority Leader Harry Reid’s plan to replace the sequester with an even balance of spending cuts and tax revenues.

They want the package to raise substantially more through taxes and cut less in spending.

Reid, a Democrat from Nevada, has sided with President Obama in supporting a 50-50 split of spending cuts and tax revenues to stop the $85 billion sequester due to take effect March 1.

However, a significant portion of Reid’s caucus argues the split should be 80-20, with tax increases making up the bulk of the package. They contend Reid and Obama are negotiating with themselves by agreeing upfront to a 1-1 ratio of tax increases and spending cuts.

A group of 15 to 20 progressive Democrats met Monday evening to discuss its concerns over the 1-1 ratio supported by Reid and Obama, according to lawmakers who were in attendance.

Senate Democratic leaders, prodded on by the White House, are attempting to put pressure on the GOP-led House by passing a sequester measure.

Speaker John Boehner (R-Ohio) has repeatedly noted the House twice passed legislation in the last Congress that would have replaced the pending cuts to defense and domestic programs.

Lawmakers are increasingly anxious about the sequester, which the Congressional Budget Office estimates would lead to the loss of 750,000 jobs this year.

Reid is unlikely to pivot to an 80-20 breakdown, which would be unpopular among Democrats from Republican-leaning states who are up for reelection next year.

Liberal senators fear the ratio would become tilted more heavily toward spending cuts when and if Reid negotiates with Senate Republican Leader Mitch McConnell (Ky.) to move the proposal through the Senate.

Should a deal move through the upper chamber, subsequent talks with Speaker John Boehner (R-Ohio) would likely push the ratio even further in the direction of spending cuts before it reaches Obama’s desk.

Senate liberals say this outcome would be unfair because, by their calculation, Congress has already enacted $1.7 trillion in spending cuts compared to collecting only $700 billion in new taxes. The members claim the total amount of deficit reduction, including proposals passed in the last Congress, should raise a dollar in taxes for every dollar it cuts in spending.

“In order for the whole thing to tally out at one for one, we need to raise about $1.3 trillion in revenue and little over $300 billion in cuts,” said Sen. Tom Harkin (D-Iowa).

Harkin said if the sequester package is evenly divided between tax revenues and spending cuts, “it means we’re going to have a lot more cuts than revenue, and that’s not right, not fair.”

But Reid has shown little sign of bending to the pressure. He told reporters this week the package being drafted to replace the sequester “will include equal amounts of revenue and cuts.”

Reid must protect six vulnerable Senate colleagues who are running for reelection in 2014 in states carried by Mitt Romney.

Centrist incumbents such as Sens. Mark Pryor (D-Ark.) and Max Baucus (D-Mont.) are reluctant to support any package to address sequester that leans disproportionately on closing tax loopholes.

Baucus, the Senate Finance Committee chairman, has warned against rushing to reform the tax code to find a way to stop the automatic spending cuts without adding to the deficit.

“When it comes to tax reform, we must avoid the urge for the quick fix,” Baucus said in a statement. “Tax reform is about more than revenues. It is about simplifying people’s lives, encouraging businesses to invest and grow, and boosting innovation and education.”

A senior Democratic aide predicted liberal Democrats will ultimately vote for the sequester package Reid is working on. Baucus, Senate Appropriations Committee Chairwoman Barbara Mikulski (D-Md.) and Budget Committee Chairwoman Patty Murray (D-Wash.) are also involved in the discussions. They are expected to brief the Democratic caucus about the legislation on Thursday.

Senators in favor of the 80-20 split maintain there is strong public support for closing an array of special tax breaks. They have zeroed in on offshore tax shelters and tax incentives for companies that move their manufacturing facilities overseas.

Boxer said the sequester can be postponed for a year “without any pain” and without spending cuts that would lead to job losses.

She said the focus should be on ending niche tax breaks, not cutting more from government programs.

“We’ve already had huge spending cuts. Huge,” she said.

Sen. Sheldon Whitehouse (R.I.) and several others in the Democratic caucus have introduced two bills to replace the across-the-board cuts due to take effect at month’s end.

One measure would stop the sequester for the rest of fiscal 2013 and pay for the $85 billion cost by ending a variety of tax breaks.

It would enact the “Buffett Rule,” requiring taxpayers earning over $2 million annually to pay a 30 percent effective rate; prohibit high-income professionals from avoiding payroll taxes by claiming corporate status; repeal tax breaks for private jets; end tax subsidies for oil and gas companies; and eliminate tax breaks for manufacturers that produce goods overseas for sale in the U.S.

The second bill would repeal the entire sequester over the next nine years. It would cover the $960 billion cost by enacting the tax reforms of the one-year proposal and others, such as a 28 percent limit on itemized deductions. It would also establish a financial transactions tax, a 0.15 percent fee for the nation’s largest financial firms, and end tax breaks for property and profits held in foreign counties.

Republican leaders are wavering on how aggressively to pursue an overhaul of the tax code this year, just three months after the party’s top tax writer vowed to pass legislation with or without President Obama’s cooperation.

Speaker John Boehner (R-Ohio) has cast doubt on the likelihood of a big GOP tax push, and when Obama called for comprehensive reform in his State of the Union address on Tuesday night, key Republicans sat on their hands.

“There’s a debate going on about whether we can get to the kind of tax reform we want given the outcome of the election,” Boehner told television anchors before Obama’s address. “We’d love to do tax reform,” he said.

“Lower rates for all, clean up the code, make it simpler. But why go through all that effort if it isn’t going anywhere, or why go through that effort if the outcome would be unacceptable?”

At the outset of a press conference on Wednesday, Boehner said the two parties “must work together on pro-growth economic policies — things like making sure that our tax code is competitive.”

But the Speaker made no firm commitment on legislation.

The equivocation is a far cry from the rhetoric top Republicans used in the weeks after the November election.

“Tax reform is more necessary now than it was in 1986, and that is why the Ways and Means Committee will write, act on and pass comprehensive tax reform legislation in 2013,” Chairman Dave Camp (R-Mich.) declared in a Nov. 15 speech to the Tax Foundation. “Let me repeat that: We intend to move a comprehensive tax reform bill in 2013 — no matter what.”

Camp told The Hill on Wednesday that he remained committed to passing a tax overhaul out of the committee this year, but whether it will get a vote on the House floor remains an open question.

“I’m not going to get ahead of myself. I’m going to take it one step at a time,” the chairman said in an interview.

The shift is born of a reluctance to wade into a negotiation with Obama, a partner that Boehner and other senior Republicans increasingly distrust. And while Boehner once agreed with the president that tax reform and a limited rate increase in 2012 could generate upward of $1 trillion in new revenue to reduce the deficit, he pulled that offer from the table after Obama won more than $600 billion in tax increases at the beginning of the year.

Republican leaders in the House and Senate are now ruling out any additional revenue, reverting to their plan to pursue tax reform that is revenue-neutral.

Rep. Pat Tiberi (R-Ohio), a senior Ways and Means member, said Boehner’s comments underscored that tax reform would have to start in the House, and he gave voice to the deep frustrations Republicans have with the Democratic-led Senate and the White House.

“I think the Speaker’s obviously expressing a frustration with the lack of the Senate getting much done and the lack of leadership this president is providing on big issues,” said Tiberi, who is close with both Boehner and Camp. “I don’t think the two things are incompatible.”

Still, a decision to put off tax reform would likely rankle Republicans on the Ways and Means Committee, who have made the achievement a top priority since the beginning of 2011.

Aides say Camp has Boehner’s full support to advance a tax overhaul in the committee and is moving forward. On Wednesday the chairman announced the formation of 11 separate bipartisan working groups on tax reform, the next step in a process that could lead to legislation.

“It’s a long process, and I’m going to move the ball down the field, day in and day out,” Camp told The Hill. “I don’t think the commitment has changed. I just think [the Speaker] is verbalizing the reality that it’s a difficult thing to do, but most important things are difficult.”

The long-running Republican debate over tax reform strategy underscores the heavy lift of rewriting a code for the first time in more than a quarter century. Some lawmakers believe the party should take the lead on the issue regardless of Obama’s cooperation, while others are worried about the ramifications of voting on legislation that would limit popular deductions if the measure stood little chance of becoming law.

Sen. Orrin Hatch (Utah), the top Republican on the tax-writing Finance Committee, said he understood the House GOP’s frustrations but advised them to push forward anyway.

Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee, also backed action on tax reform. “We’re going to do it this year. That’s all I’ll say,” Ryan told The Hill after referring questions to Camp.

Camp has also been working with his Democratic counterpart in the Senate, Finance Committee Chairman Max Baucus (Mont.), who on Wednesday pressed Obama’s nominee for Treasury secretary, Jack Lew, on the administration’s commitment to tax reform.

Baucus is trying to balance the goals of finding revenues to eat into deficits while also comprehensively revamping the tax code.

In his State of the Union speech, Obama said, “Now is our best chance for bipartisan, comprehensive tax reform that encourages job creation and helps bring down the deficit.”

The section drew some bipartisan applause, but a few Republican leaders said Obama’s recipe for tax reform was merely tax increases, not the lower rates the GOP believes are essential.

“He said we needed tax reform, but only if it raises taxes,” concluded House Majority Leader Eric Cantor (R-Va.).

Camp, who sat next to Baucus during the speech, put a more positive spin on the president’s expressed support for “comprehensive” reform.

“It was an important statement that tax reform be comprehensive for both individuals and businesses,” Camp said. “That was an important point that he made, and I welcome that.”

Democrats and Republicans in Washington agree: It would be a disaster if the “sequester,” with its more than $1 trillion of cuts to defense and domestic spending, takes effect March 1, as scheduled.

Defense Secretary Leon Panetta says the reductions to his budget would undermine national security; the cuts to already pared-down domestic spending will set back critical needs such as cancer research, the Head Start federal preschool program for young children and funding for the Border Patrol. The economic recovery would be impeded, at a cost of as many as 750,000 jobs.

President Barack Obama says the cuts “are a really bad idea.” In a rare display of accord, House Speaker John Boehner says the “meat axe” approach would “weaken” the nation’s defense. Obama and Boehner were two of the authors of the 2011 sequester agreement, figuring a sensible alternative would have emerged by now.

It hasn’t, and the sequester could kick in, even if only temporarily. It’s a textbook case of Washington dysfunction.

Both sides created this debacle, but there is no equivalency of blame today. Any alternative must emphasize reductions in mandatory entitlement programs and add revenue. Obama, publicly and privately, has left no doubt he will surrender the Democrats’ political trump card and accept cuts in programs such as Medicare. Republican leaders insist they won’t give ground on new revenue, without which there can be no deal.

An impasse will be unsettling to markets and the economy in the long run, even if deficit hawks exaggerate the severity of the crisis.

Tenuous Outlook

“The 10-year budget outlook remains tenuous,” says Bill Gale, director of economic studies at the Brookings Institution. “Even if seemingly everything goes right -- in economic terms and political terms -- we are still on the edge of dangerously high debt and deficit levels.”

It isn’t hard to devise a feasible alternative, if the irrational politics are put aside. First, any deficit-reduction plan should wait two years. That’s because the deficit has already been narrowed by almost $2.5 trillion over the next decade. In the short term, the government needs to bolster the shaky recovery by spending more on infrastructure and other projects.

Then, it should put in place a long-term $1 trillion deficit-reduction package, half of which is achieved through entitlement cuts, one-third through tax increases and the rest by shrinking discretionary programs, chiefly defense, which are funded through annual appropriations from Congress. That would send an encouraging sign to markets and help the economy, but only if it’s a long-term plan, rather than the one-year fix that Senate and House Democrats are proposing.

Entitlements or mandatory programs such as Medicare and Social Security make up almost 60 percent of the federal budget, and are the engine of chronic deficits. Getting $500 billion over 10 years wouldn’t be pain-free, though it doesn’t have to hurt those who can least afford to sacrifice.

The president has said he would go along with the scope of the Bowles-Simpson deficit commission’s proposed cuts to Medicare. That’s about $350 billion. It wouldn’t require cuts for the most needy, but would contain a means test for more affluent senior citizens. A sensible deal wouldn’t increase the eligibility age and would introduce more stringent cost controls and hit up drug companies for a little more.

Inflation Calculation

Half the remaining savings could come from changing the formula for the cost-of-living increases for Social Security and other inflation-adjusted entitlements. That’s a realistic proposal if protections are carved out for the very poor and the very elderly. The Center for American Progress has offered workable specifics. The rest could come from cutting agricultural subsidies and other entitlement programs.

The White House would buy this; and it has been the dream of Republicans for years.

On taxes, Republicans contend that the fiscal cliff deal in January, which raised taxes on the wealthy by $600 billion, means any further revenue-raisers are off the table. A number of party leaders also pay lip service to the Bowles-Simpson recommendations, which proposed $1 of revenue for every $2 of spending cuts, after eliminating former President George W. Bush’s high-end tax cuts. If these Republicans have their way and the sequester or any alternative to it is exclusively spending cuts, that ratio would be more than 4 to 1.

The easiest way to get that revenue would be a plan resembling the administration’s proposal to limit deductions to the 28 percent rate, and then exclude charitable deductions from that cap. That would raise more than $300 billion.

The other Republican argument is that any tax changes should await broad tax reform. But limiting deductions wouldn’t narrow their options or dash their hopes of using reform as a vehicle for lowering rates. There are endless possibilities for curbing tax breaks in a revenue-neutral measure that also lowers rates, including scaling back big-ticket items such as the home- mortgage deduction or health-care exclusion or the preferential treatment for capital gains. Other changes are politically appealing, such as ending the carried-interest loophole for rich investors or the tax breaks for the oil and gas industries.

What shouldn’t be cut is non-defense discretionary spending, such as veterans’ programs, medical and scientific research and education. Even without the sequester, these programs are headed toward their lowest level, as a percentage of the economy, since the Eisenhower administration.

An entitlements and revenue-based deal, however, would approximate the Bowles-Simpson targets, and engender confidence in markets and businesses. The politicians could then turn to tax reform, immigration, gun violence, maybe a modest climate- change measure, and substantive oversight.

As a bonus, a successful deal might also lessen public cynicism about Washington.